Employment protection and employment in Europe: a sectoral analysis

• Employment protection has different consequences on employment at a sectoral level • When detected, the impact on sectoral employment is different for protection to permanent contracts and temporary contracts • Lower employment protection for permanent and temporary workers does not have a positive impact on employment growth The paper analyses the impact of employment protection legislation (EPL) on job creation in a group of thirteen European countries over the period 1985-2019. Unlike other existing papers, the paper analyses the behaviour of total employment and salaried employment at a sectoral level, examining the determinants of employment growth in five sectors: agriculture, construction, non-manufacturing industry, manufacturing, and services. The results of the study show that the impact of the EPL varies depending on the sector of activity and whether the employment protection effect for temporary or permanent contracts is taken into account. It must also emphasized that the effect of employment protection depends on the growth of the sectoral economic activity, measured by the gross value added effect, and on the phase (expansion or recession) of the sectoral business cycle.